CALGARY, ALBERTA--(Marketwire - Aug. 4, 2011) - NuVista Energy Ltd. ("NuVista") (TSX:NVA) is pleased to announce results for the three and six months ended June 30, 2011 and provide an update on its 2011 business plan.
Significant highlights for the second quarter of 2011 include:
-- Achieved funds from operations of $41.0 million for the three months
ended June 30, 2011 compared to $33.3 million for the three months ended
March 31, 2011;
-- Achieved average production of 25,488 Boe/d for the three months ended
June 30, 2011 compared to 26,078 Boe/d for the three months ended March
31, 2011;
-- Increased oil and liquids production to 8,190 Bbls/d from 7,561 Bbls/d
in the same period in 2010. Our oil and liquids production weighting
increased to 32% from 27% in the same period in 2010;
-- Drilled 9 (6.4 net) wells resulting in 8 (5.9 net) oil wells and 1 (0.5
net) natural gas well, for an overall success rate of 100%. Seven of the
nine wells were operated oil wells drilled in our Saskatchewan and
Eastern Alberta operating areas;
-- Drilled 2 (1.5 net) successful Birdbear oil delineation wells extending
the Hallam pool to the south, following up on a successful extension
well drilled in the first quarter of 2011;
-- Began production from our first horizontal Spirit River liquids-rich
natural gas well in our Pembina/Ferrier operating area in late April at
a restricted rate of 5 MMcf/d. Subsequent to the end of the second
quarter, we completed a horizontal Notikewin liquids-rich natural gas
well that was drilled in our Pembina/Ferrier operating area in the
fourth quarter of 2010, and began producing this well at a rate of
approximately 4 MMcf/d;
-- Completed the sale of 250 Boe/d of Pembina Cardium properties in April
2011 for total cash consideration of $37.2 million resulting in a pre-
tax gain of $27.0 million which is included in net earnings for the
period; and
-- Reduced debt, net of adjusted working capital, to $291.3 million at June
30, 2011 from $355.0 million at March 31, 2011 and $444.0 million at
December 31, 2010.
Production of 25,488 Boe/d in the second quarter of 2011 reflects a muted level of spending in the first half of 2011, the Pembina Cardium divestment of 250 Boe/d, and planned and unplanned third-party plant outages impacting production by approximately 700 Boe/d. Despite reduced capital expenditures, production remained relatively flat in the second quarter compared to the first quarter of 2011. Operating expenses remained relatively unchanged in the second quarter of 2011 compared to the first quarter of 2011. Managing our operating costs continues to be a priority over the remainder of the year as we target higher value, but typically higher operating cost, oil and liquids-rich natural gas production.
2011 continues to be a year of re-positioning NuVista for its next phase of growth. Our focus for the first half of 2011 was to complete the search for a new CEO, improve our financial flexibility, and execute a low risk drilling program of higher netback oil and liquids-rich natural gas wells. In the first quarter of 2011 we significantly reduced our debt with the completion of a $99.8 million equity offering. In the second quarter we further reduced our debt levels by $37.2 million through the sale of certain properties in our Pembina operating area, resulting in debt net of adjusting working capital of $291.3 million at the end of the quarter. On May 9, 2011, Mr. Jonathan Wright joined NuVista as CEO, as previously announced. Since joining NuVista, Jonathan has focused on integrating himself into NuVista by meeting with all staff members and spending time reviewing NuVista's properties and drilling opportunities to begin redefining NuVista's vision and business strategy, with a strong emphasis on disciplined delivery. We expect to be in a position to communicate additional information on our future growth and value creation strategy in September 2011.
During the second half of 2011, we expect to have a very active drilling program as we plan to spend $100 million of the $160 million 2011 capital program. Drilling activity will continue to be focused on delivering near-term operating and financial results by drilling oil wells in Saskatchewan and Eastern Alberta, as well as advancing our Wapiti Montney liquids-rich natural gas play which has potential to add significant long term shareholder value. In addition, we plan to drill Spirit River and Notikewin liquids-rich natural gas wells in our Pembina/Ferrier operating area. We continue to place increased emphasis on cost discipline, efficient execution and profitability as we execute our 2011 business and plan for the future.
The oil plays in Saskatchewan and Eastern Alberta currently have the best risk/return profile of our opportunity inventory due to their strong economics, lower drilling and completion costs and short cycle time. We expect to drill 25 to 30 horizontal oil wells during the second half of the year. The focus of our drilling program will be on the development wells at Zoller Lake and Hallam, the development wells and further delineation wells at our southern extension of the Hallam pool and the testing of new Birdbear prospects. Five Birdbear wells were drilled in the second quarter following spring break-up and five wells have already been drilled in the third quarter.
Due to NuVista's and industry's strong results from the Spirit River and Notikewin liquids-rich natural gas wells in the Pembina/Ferrier operating area, we will be allocating more capital to this play in order to grow production and further bolster the size of our opportunity inventory. The Spirit River and Notikewin is not a blanket resource play, however, based on vertical well control there is a strong element of repeatability. We have identified 15 to 20 well locations that are expected to have strong economics in the current natural gas price environment. With continued positive results, a number of contingent follow-up locations are planned. During the second half of 2011, we plan to drill at least three Spirit River/Notikewin wells.
As an early mover in the Wapiti Montney area, NuVista assembled a dominant land position, now holding 144 net sections. This area has recently seen a significant increase in land sale activity and price. We have identified a multi-year inventory of prospects to follow success in the upcoming 2011/2012 drilling activity. The key focus for the twelve month period beginning July 2011 is the $70 million Wapiti Montney capital program. The purpose of this is to understand the scope, costs and recoverable reserve potential of this liquids-rich natural gas play, as well as validate leases and licenses. NuVista has benefited from increased industry activity in this general area, and industry results, combined with our own, continue to indicate that this liquids-rich natural gas play has the potential to add significant reserves, production and long term economic value for our shareholders, even in the current natural gas price environment. We began drilling our first 2011 Wapiti Montney well at the North Block in early July. For the second half of 2011, approximately $30 million has been allocated to the Wapiti Montney play with plans to drill two wells at our North Block, one well at our South Block and begin construction of a compressor/dehydration facility at the North Block.
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Corporate Highlights
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Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
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Financial
($ thousands, except per share)
Oil and natural gas revenue 95,719 89,524 183,956 195,043
Funds from operations(1) 40,963 38,757 74,262 91,864
Per basic share 0.41 0.44 0.78 1.04
Per diluted share 0.41 0.44 0.78 1.04
Net earnings (loss) 22,445 (6,417) 12,855 (20,496)
Per basic share 0.23 (0.07) 0.13 (0.23)
Per diluted share 0.23 (0.07) 0.13 (0.23)
Total assets 1,501,517 1,593,021
Long-term debt, net of adjusted
working capital(1) 291,250 405,856
Net capital expenditures 15,000 41,069 54,777 116,887
Weighted average common shares
outstanding (thousands):
Basic 99,450 88,539 95,570 88,491
Diluted 99,495 88,539 95,619 88,491
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Operating
Production
Natural gas (MMcf/d) 103.8 125.7 105.6 125.1
Natural gas liquids (Bbls/d) 3,008 3,049 3,051 3,175
Oil (Bbls/d) 5,182 4,512 5,137 4,458
Total oil equivalent (Boe/d) 25,488 28,512 25,781 28,484
Average product prices(2)
Natural gas ($/Mcf) 3.92 4.34 3.97 4.87
Natural gas liquids ($/Bbl) 66.39 49.96 62.49 52.02
Oil ($/Bbl) 79.71 61.15 72.79 64.59
Operating expenses
Natural gas and natural gas
liquids ($/Mcfe) 1.78 1.18 1.76 1.18
Oil ($/Bbl) 14.55 17.31 15.27 17.88
Total oil equivalent ($/Boe) 11.45 8.71 11.48 8.79
Operating netback ($/Boe) 21.44 18.40 20.07 21.27
Funds from operations netback
($/Boe)(1) 17.66 14.93 15.92 17.81
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Share trading statistics
High 10.04 13.16 10.45 14.56
Low 8.59 9.65 8.56 9.65
Close 9.10 10.16 9.10 10.16
Average daily volume 119,332 245,579 119,337 311,171
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NOTES:
1. Funds from operations, funds from operations per share, funds from
operations netback, operating netback and adjusted working capital are
not defined by GAAP in Canada and are referred to as non-GAAP measures.
Funds from operations are based on cash flow from operating activities
as per the statement of cash flows before changes in non-cash working
capital and asset retirement expenditures. Funds from operations per
share is calculated based on the weighted average number of common
shares outstanding consistent with the calculation of net earnings
(loss) per share. Funds from operations netback equals the total of
revenues including realized commodity derivative gains/losses less
royalties, transportation, operating, general and administrative,
restricted stock units, interest expenses and cash taxes calculated on a
Boe basis. Operating netback equals the total of revenues including
realized commodity derivative gains/losses less royalties,
transportation and operating expenses calculated on a Boe basis.
Adjusted working capital excludes the current portions of the commodity
derivative asset or liability. Total Boe is calculated by multiplying
the daily production by the number of days in the period. For more
details on non-GAAP measures, refer to NuVista's "Management's
Discussion and Analysis".
2. Product prices include realized gains/losses on commodity derivatives.
OUTLOOK
Our Board of Directors has approved a 2011 base capital budget of $160 million. The primary objective of the 2011 capital program is to balance near-term operating and financial results with the selective evaluation of repeatable plays that can provide future growth opportunities. For the second half of 2011, capital spending is budgeted at $100 million and we expect to drill approximately 40 gross wells. There is room to increase the final capital budget for 2011 but this will be determined in the third quarter based on commodity prices and drilling results.
Based on a 2011 constrained capital budget of $160 million, facility outages experienced during the first half of 2011 and the disposition of properties in the second quarter, our production guidance for 2011 remains unchanged with production forecast to average between 25,000 Boe/d and 26,000 Boe/d. We are forecasting NuVista's average 2011 oil and liquids weighting to increase which, based on current commodity prices, should have a positive impact on our netbacks and cash flow. Based on NuVista's planned capital program, its oil and liquids weighting is expected to average approximately 32% of production during 2011 compared to our weighting of 28% in the fourth quarter of 2010. 2011 funds from operations are forecast to be approximately $160 million based on the estimated production rate and current pricing assumptions of $3.80/Mcf for AECO natural gas, US$95/Bbl for WTI crude oil, a foreign exchange rate of 1.04, and including price risk management contracts currently in place. NuVista will continue to prudently manage its financial flexibility and forecasts a year end debt to funds from operation ratio of less than 2.0:1.
For 2011, the outlook for natural gas supply/demand fundamentals and natural gas prices continues to be uncertain and, as a result, we plan to carefully manage our business plan and financial flexibility to endure continued weak prices. We are gearing for repeatable profitable plays in a $4.00/Mcf gas world such that commodity strength above that value only accelerates and enhances our progress. With a talented and highly motivated workforce, improved financial flexibility and a business strategy focused on discipline, execution and profitability, we look forward to updating you on the progress of our 2011 business plan and longer term plans for shareholder value creation, throughout the remainder of the year.
CONSOLIDATED FINANCIAL STATEMENTS AND MD&A
Second quarter 2011 interim consolidated financial statements and notes to the interim consolidated financial statements and Management's Discussion and Analysis for NuVista Energy Ltd. have been filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. and can also be accessed on NuVista's website at www.nuvistaenergy.com.
ADVISORY REGARDING OIL AND GAS INFORMATION
This news release contains the terms barrels of oil equivalent ("Boe") and thousand cubic feet equivalent ("Mcfe"). Natural gas is converted to a Boe using six thousand cubic feet of gas to one barrel of oil. In certain circumstances natural gas liquid volumes have been converted to a Mcfe on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and Mcfes may be misleading, particularly if used in isolation. The foregoing conversion ratios are based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
ADVISORY REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management's assessment of: NuVista's future strategy, plans, opportunities and operations; forecast production; production mix; drilling, development, completion and tie-in plans and results; NuVista's planned capital budget; targeted debt level; the timing, allocation and efficiency of NuVista's capital program and the results therefrom; plans regarding facility construction and/or expansions, the timing thereof and the results therefrom; the anticipated potential of NuVista's asset base; forecast funds from operations; the source of funding of capital expenditures; the objectives and focus of the 2011 capital program and the allocation thereof and results therefrom; expectations regarding future commodity prices and netbacks; and industry conditions; and anticipated accounting changes and the impact on NuVista's operations and financial position.
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista's control, including the impact of general economic conditions, industry conditions, current and future commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and funds from operations, the timing, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties; the ability to access sufficient capital from internal sources and bank and equity markets; and including, without limitation, those risks considered under "Risk Factors" in our Annual Information Form. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. NuVista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Contact Information:
Jonathan Wright
President and CEO
(403) 538-8501
NuVista Energy Ltd.
Robert F. Froese
VP, Finance and CFO
(403) 538-8530